PILLAR Corporation

The Group's products are functional components incorporated into various equipment and machinery, and unexpected defects could affect business performance. Although the Group has established a quality assurance system by building a quality management system through ISO9001 certification, given the nature of functional components, there is an inherent risk that defects could directly affect the performance of customers' equipment.

Pillarflon Products, the mainstay products of the Electronic Equipment-related Business, are widely used in semiconductor manufacturing equipment and LCD manufacturing equipment. Although the market has been on an expanding trend in recent years, an unexpected rapid contraction of the market could affect business performance. The semiconductor and LCD industries experience extremely intense technological innovation, and the structure is such that fluctuations in market cycles directly affect sales.

The semiconductor market and hydrogen market, in which Mechanical Seal Products, Gland Packing/Gasket Products of the Industrial Equipment-related Business are traded, are on an expanding trend, but an unexpected rapid contraction of the market could affect business performance. While the Group is capturing growth in the hydrogen market and other areas with an eye toward carbon neutrality, there is also vulnerability to sudden changes in the market environment.

Fluctuations in the financial and stock markets and the economic environment due to global economic trends, trade and tariff policies, geopolitical factors, and other causes could result in difficulty raising funds, declines in the fair value of held shares, and opportunity losses due to delays in product supply to customers. Although the Group continuously monitors the latest market trends and economic conditions to optimize capital investment and personnel and inventory plans, there are limits to what can be done in response to sudden changes in the external environment.

Overseas sales in FY2026 (ending March 2026) reached ¥206,380 million (overseas sales ratio of 34.7%), and unexpected changes in the political and economic systems of the countries in which the Group operates, natural disasters, infectious diseases, and other factors could affect business performance. In addition, sharp fluctuations in foreign exchange rates directly affect business performance. Although the Group is addressing this through the development and establishment of an optimal regional production structure and the promotion of local procurement, it is difficult to completely eliminate geopolitical risk and foreign exchange risk.

With respect to special steel materials, fluorine resin, and other main raw materials, resource depletion, and delays or stoppages in supply due to reduced production capacity, business withdrawal, or quality defects on the part of suppliers could affect production activities. There is also an inherent risk that if increases in raw material prices cannot be passed on to product costs, profitability could deteriorate.

If information leakage occurs due to unauthorized access or unauthorized operations resulting from increasingly sophisticated cyberattacks, it could lead to a decline in social credibility and a prolonged suspension of business, which could have a material impact on business performance. Although the Group has established an Information Security Committee to strengthen its organizational response, continuous countermeasures are required in response to the increasing sophistication of threats.

If the Group is unable to continuously recruit and retain the necessary human resources, or if it fails to sufficiently develop an environment in which diverse personnel can thrive, this could lead to a decline in product development capabilities, a decline in employee engagement, the occurrence of labor disputes, and other issues, resulting in a risk that the Group cannot realize an organization with competitive advantage. Although the Group is focusing on promoting diversity and implementing personnel measures that leverage the individuality and abilities of diverse personnel, intensifying competition in the labor market could make it difficult to secure human resources.

Violations of various laws and regulations could result in a loss of social credibility, the imposition of fines or damages, export bans, business restrictions, and other consequences, which could affect business performance. Although the Group works to detect and correct misconduct at an early stage through the establishment of the "Group Code of Conduct," thorough compliance with laws and regulations, and the operation of a whistleblowing system, the scope of applicable laws and regulations is expanding as global operations expand.

Natural disasters such as a directly-hit major earthquake or tsunami could make it difficult to continue plant operations, and accidents such as fire, explosion, or lightning strikes could force a partial suspension of operations, potentially having a material impact on business results and financial condition. Although the Group has formulated business continuity plans (BCP) at its main sites and is promoting regular reviews and risk reduction measures, it is difficult to completely avoid the impact of a large-scale disaster.